Only about a third of UK employees are saving enough to achieve a comfortable retirement, according to the Department of Work and Pensions. Pensions Auto-Enrolment will help a little, but for many employees this comes too late to significantly change their pension outcomes.
However, this does not mean that employers are powerless to help those in the workforce who are close to the retirement age. There is a wide range of practical assistance that can be offered and importantly such help can benefit both parties.
So, what can be offered?
Benefits to the employee
Employees close to the retirement age can benefit from attendance at pre-retirement courses. Useful topics might include:
Retirement brings many changes to both income and expenditure. Fully understanding the building-blocks of retirement finance can really empower the retiree to understand the key decisions in front of them. State pensions, tax-allowances, and other state benefits can be explored here. Many employees will have private or company-funded pensions which will need to be converted to a pension income. This decision may be one of the biggest single financial decisions that an individual makes in their lifetime. So, it’s important to really understand all the issues involved in obtaining the best and most appropriate deal.
Health and relationships
Retirement often acts as a catalyst to change for a person’s routine and relationships. Understanding how to manage diet and exercise remains important, as well as providing a new post-work life structure. Areas to consider can include volunteering, hobbies and further education. All of these can go a long way to filling the void after work and help the individual to stay fit and alert.
The later years
Some retirees will also want to consider the longer term. Details on how to make a will, effect medical insurances and funding options for care in later life can all be beneficial here.
Benefits to the employer
So, there are plenty of potential benefits to the employee, but what’s in it for the employer?
Avoiding workforce stagnation
With employers no longer able to retire employees on age grounds alone, the decision to retire will often only be triggered should the employee feel that there is sufficient funds to retire in comfort. This could easily turn into workforce stagnation, and that can be a real problem for organisations. Financial education can help the employee understand state benefits, debt management, downsizing and equity-release. These can all change the employee’s perception of when retirement is possible. This in turn could mitigate the stagnation issue for employers.
Future good will
Often, an employer will need to call on the retired employee for assistance at a later date. This could be for locum cover, inherent knowledge, or to influence a long-standing client. A little good will earned at the point of retirement can go a long way.
A long-standing employee who is not provided with any practical assistance at retirement may feel bitter towards the former employer. The danger here is that the retiree may voice their negativity to friends, ex-colleagues, or via the internet. None of this would be good for how the employer is perceived. Providing assistance outlined above may well reduce, or totally remove, this potential issue. Indeed, the resultant effect might be positive PR for the employer.
So, the employer can still assist employees who are close to retirement age, and in the process also manage some potentially tricky business issues at the same time. A bit of a no-brainer, really.
Steve Herbert is the Head of benefits strategy at Jelf Group plc.
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